Multilateral lender Asian Infrastructure Investment Bank (AIIB) is providing a US$50 million loan to Ecuador’s largest public bank Corporación Financiera Nacional to address the liquidity constraints facing micro, small and medium enterprises (MSMEs) in the country as a result of the economic crisis induced by Covid-19.

The loan is provided under AIIB’s Covid-19 Crisis Recovery Facility (CRF). It is AIIB’s first loan in the country and its first financing in Latin America.

Ecuador has been severely affected by the coronavirus outbreak. The country is a commodity exporter, and falling commodity prices could have lasting effects for the economy and for public budgets. Its GDP is expected to contract by 11% this year. Indicators suggest that financial institutions have been restricting access to credit in response to the Covid-19 crisis.

Meanwhile, the pandemic has made it increasingly difficult for MSMEs to meet their operational needs and expenses, such as payroll, supplies, rent and utilities, and to procure necessary goods and services to maintain their productive capacity. MSMEs represent 99.5% of firms in the country and 60% of formal employment. Trade between Ecuador and Asia has doubled in the last decade, and a high number of exporters and importers are MSMEs.

The loan, co-financed with the World Bank, aims to provide liquidity to MSMEs to cover their working capital needs, and maintain business and trade volumes with Asia. The financing will provide, through CFN, short-term financing for MSMEs in the form of partial credit guarantees and credit lines to participating financial intermediaries. It is expected that the AIIB loan will provide 350 smaller loans and 1,000 partial credit guarantees to eligible MSMEs associated with Asia-Ecuador trade.

Konstantin Limitovskiy, AIIB’s vice president for investment operations, remarks: “This project provides crucial access to finance for private-sector corporates to help them sustain their businesses through these difficult times. By focusing our support on trade between Asia and Ecuador, we are able to assist one of our Latin American members during this economic crisis while staying true to our purpose, which is to foster sustainable economic development in Asia.”

The CRF provides up to US$13 billion of financing to both public and private-sector entities facing serious adverse impacts as a result of the pandemic. As of November 25 2020, AIIB’s Board of Directors has approved a total of 25 projects amounting to nearly US$7 billion to 17 members.